Japan's Economic Plan Has Little To Help Consumers

TOKYO — The Japanese government Thursday unveiled an economic stimulus package that it hopes will lift the world's second-largest economy out of its worst recession since the end of World War II.

As expected, the program was long on promises and short on delivery, with virtually none of the fiscal stimulus contained in the $57.6 billion package aimed at boosting sluggish consumer spending.

While most economists here say the government should cut income taxes to boost demand, the powerful bureaucrats who run this country continue to insist on maintaining a balanced budget.

In addition, the highly touted deregulation steps in the program did little to lessen the tight controls the bureaucracy holds over the economy.

The program will be the centerpiece of Prime Minister Morihiro Hosokawa's trip to Washington this month, when the architect of the sweeping changes in Japan's political arena meets President Clinton for the first time.

The sensitivity around those talks heightened Thursday when the U.S. Commerce Department reported that Japan's trade surplus with the U.S. rose to $4.74 billion in July from $4.33 billion the previous month, the biggest monthly shortfall since April's $5.5 billion deficit. The news was especially disappointing since the overall U.S. trade deficit shrank 14 percent, to $10.34 billion.

Ministry of Finance officials defended the modest size of the new stimulus package, claiming April's $125 billion stimulus program hadn't yet had time to work. "That's why this package is so small," a high official at the ministry said.

The officials stressed the non-monetary elements in the package, suggesting the deregulation steps "reflected the attitude of the Hosokawa administration and the new direction of Japanese society."

The program outlined 94 specific measures, several of which could help promote imports into Japan.

Since coming into office, Hosokawa and his seven-party coalition have pushed the bureaucrats to ease their vicelike grip on the economy.

The steps announced Thursday included reduction of the minimum-production requirements for obtaining a beer license, a step aimed at encouraging micro-breweries; allowing direct sales to consumers of cellular phones; and abolishing mandatory six-month checkups on automobiles.

The economic mandarins also took a stab at airline deregulation. They mandated that prices on discount family air fares be lowered 22.5 percent.

Most of the new public spending was earmarked for infrastructure projects and low-interest loans for home buyers. The package also included corporate tax breaks to encourage purchase of new machinery and equipment.

The government did take one step to help Japan's overburdened consumers, who, despite the soaring value of the yen, continue to pay the highest retail prices in the world. They mandated that electricity and natural gas utilities, which have seen a 20 percent decline this year in the cost of their coal, uranium and gas purchased abroad because of yen appreciation, pass those savings on to consumers.

According to the plan, the average household savings will come to 935 yen ($8.90 U.S.) per month, or about the price of a bowl of hot ramen noodles.